Engility Holdings [EGL], a government services contractor, is planning to acquire TASC, a similar firm, in a $1.1 billion all-stock transaction that is expected to close in the first quarter of next year, the companies announced Tuesday.
They said the merger will create a combined projected revenue of $2.5 billion based on 2014 numbers. Tony Smeraglinolo, Engility president and CEO, said in a statement that the acquisition of TASC is part of Engility’s strategy to grow and diversify the company’s customer base.
“The combination of our two complementary businesses is transformational and represents a unique opportunity to create a top-tier government services company,” Smeraglinolo said.
“We expect this transaction to extend our track record and accelerate our growth strategy, which is focused on further diversifying our customer base, adding substantial scale to our business, broadening our capabilities and increasing our addressable market,” he said. “Following the completion of the transaction, we expect our stockholders to benefit from an enhanced adjusted earnings growth rate, a significantly increased free cash flow and a lower effective cash tax rate.”
TASC was founded in 1966 and provide systems engineering and mission-enabling architectures in national security and public safety, particularly in intelligence. The company is controlled by affiliates of Kohlberg Kravis Roberts & Co. L.P. and General Atlantic LLC. TASC employs 4,000 people.
TASC is a prime contractor on 85 percent of its work and is expected to generate $1.1 billion in revenue in 2014, the companies said.
“Together with Engility, we will offer customers an even more comprehensive suite of high-quality offerings to meet their evolving mission and affordability requirements,” said John Hynes, TASC president and CEO.
Under the merger agreement, the name Engility Holdings will be maintained. Hynes will become the COO. TASC was once owned by Northrop Grumman [NOC] but was spun off in 2010.